Electronic Design

Intellectual Property—What's Yours Is Mine

New questions are being raised about the practice of engineers signing pre-assignment IP agreements with their employers. Whose idea or invention is it?

Over the years, Kilby has won lots of recognition and several important awards for inventing the IC, including the 2000 Nobel Prize in Physics. But what about personal remuneration? Other than his salary, how much has Kilby actually earned from his role in creating this truly significant invention?

TI won't say. But questions about pre-assignment intellectual property (IP) agreements, the practice of engineers assigning their ideas and inventions to companies, are resurfacing from the IEEE-USA. In June, the Washington, D.C.-based lobbying office of the institute, which represents the IEEE's 230,000 U.S. members, published an updated, more detailed version of an earlier position paper covering the invention rights of engineers. The IEEE expects the paper to eventually develop into legislation to take to Congress.

Both position papers (the earlier version was published in November 2000) point out that such agreements are usually nonvoluntary, but that engineers must sign them as a precondition of employment.

The new version calls for timely and complete disclosure of required terms prior to, or simultaneous with, an offer of employment. "Our collective experiences and those of our correspondents," the IP committee says in its new position paper, "demonstrate that employers often have a dominant bargaining position." The new position paper also suggests that the employer consider reasonable objections and requests for modifications of terms. Such agreements should include reasonable efforts by the inventor to cooperate with the employer, even after the termination of employment. But the new position paper also says that "ethical standards require that the inventor be reasonably compensated."

CONSTITUTIONAL LAW
The U.S. Constitution grants specific rights to ownership of IP under Article I, Section 8, Clause 8. But for years, engineers have been signing pre-assignment IP agreements when they join companies, universities, and government agencies, passing their ideas and inventions on to their employers.

Lawnotes, a law facts Web site, indicates that no sweeping rules exist in the U.S. requiring employees to assign their inventions to their employers. Under the law, it's presumed that the inventor owns his or her invention, and that individuals own their patent rights, even though ideas are conceived and developed into an actual product during the engineer's course of employment. In practice, though, employees may be legally obligated to turn over their inventions to their employers.

According to Lawnotes, if employees are "hired to invent," they probably will be obligated to assign their inventions to their employees. In some cases, employers seek to strengthen their position against future lawsuits with a followup letter or memo to the employee (sent after the pre-assignment agreement is signed), reminding the employee that he was hired to invent. In cases where employees are "set to experiment," as Lawnotes calls it (that is, asked to solve a problem), they probably will be obligated to assign their invention rights to the company.

It starts to get complicated with outside contractors, such as consultants who work alone or with a company designer or researcher, when they come up with a new development or invention. That's why most companies require that even consultants sign agreements similar to their technical employees.

In addition, there are "shop rights." Here, a former employer may have provided funding or other support to develop a technology or product. Even if it does not own the patent rights to the technology, Lawnotes says, the company may still have shop rights in the form of a nonexclusive, royalty-free right to use the technology. Meanwhile, most industry companies continue to require their engineers to sign pre-assignment IP agreements, giving the company all, or most, of the rights to any of its engineers' technical developments.

"Some people believe that you can negotiate these things," says Robert J. Kuntz, who has done extensive research in the field of employee inventors for several years. "But how do you negotiate with a gorilla?"

IEEE APPROACH
Through its IEEE-USA IP Committee's objective, the IEEE aims to create a bilateral relationship between employee inventors and their employers to increase disclosure, as well as protect engineers' IP as intended by the Constitution. Any change in the IEEE's position would require approval by the IEEE-USA's board of directors. "As near as I can determine, the IEEE is the only technical or professional society actively examining this challenge," says Kuntz.

To help strengthen its position, the committee last year asked IEEE members to submit their thoughts on and experiences with pre-assignment employment agreements. So far, the response has been overwhelmingly in favor of rewriting, or even eliminating, agreements that require engineers to sign away what Kuntz calls a "fundamental Constitutional right as a condition of employment." However, some companies and academic institutions provide incentives for their engineers' ideas and other IP above and beyond their salaries.

Analog Devices, for example, offers a special monetary award that's split among the inventors where appropriate. Patents considered to be potential fundamental patents with far-reaching implications are given additional compensation.

"We are somewhat selective about what we file," says Doug Grant, director of business development of Analog Devices' RF and Wireless Systems Business Unit in its DSP and Systems Products Group. "Our patent portfolio is based on technologies we have developed for practical products."

What about engineers who join Analog Devices from other companies, bringing their know-how and experience with them? Grant says that Analog Devices respects the IP of other companies and expects new hires to adopt the same level of respect for their previous employers' IP. "Employees who leave Analog Devices are expected to respect our IP as well," he says. "We believe that our products, technologies, and processes are leading-edge. Without due respect for IP protection, we stand to lose a lot."

At RF Micro Devices, patents are put under engineers' names, and the company pays engineers a bonus for the patent. This usually occurs in segments: upon submission of the patent, the initial approval of the patent, and final grant-ing of the patent. "This is also the way it worked at my previous company \[Plessey, GEC Plessey, and Mitel, now Zarlink\]," says Brent Wilkins, senior marketing manager for digital cellular products at RF Micro Devices.

Like Analog Devices, most companies, including RF Micro Devices, pay their engineers a flat fee in the few-thousand-dollar range for patent awards. Engineers aren't normally paid a bonus or commission based on the success of a product or idea.

ACADEMIA
Most universities with engineering design centers sponsored by industry companies have similar arrangements. One example is the Yamacraw Design Center. In less than four years of research by the center, 83 invention disclosures were submitted. Most of them came out of Georgia Tech (through the nonprofit Georgia Tech Research Corp., or GTRC), but others originated from Georgia State University and Southern Polytechnic State University.

Full member companies join Yamacraw for an annual fee of $25,000. Now numbering close to 30, they include Agilent Technologies, Bellsouth, Broadcom, Nortel Networks, Samsung Electronics, and VeriSign. They receive non-exclusive royalty-free licenses to the IP, upon request, for five years. After that, a royalty-bearing license is negotiated.

"Our emerging companies may negotiate a license for the intellectual property with fair and reasonable terms," says Elizabeth Judson, Yamacraw's director of industry relations. Her responsibilities include implementing the organization's commercialization activities and managing its IP. According to Judson, the benefit to these companies is that they may be aware of the technology earlier than the public, but they don't invest as much in the center as the full members.

Yamacraw researchers, mostly faculty members but also research engineers and post-doctoral and graduate students, are rewarded if their inventions bring in a royalty stream, although each university has its own policy on this. Judson says that the inventor would typically receive the first $2000 to $3000 of royalty income (after patenting costs have been covered), and then about one-third of future royalty income. The remaining two-thirds is distributed to the university, school, and/or center under which the work was done.

At the federal government level, the Federal Technology Transfer of 1986 enables government employees working in federal laboratories that are "government-owned and government-operated" to receive a 15% royalty from what the government receives by sales or licensing of the patent to a private company.

Another factor in pre-assignment IP is what happens with an employee who comes up with a potential winner but has left the company before a patent has been awarded. Generally, the company-based reward programs aren't applicable to non-employees or ex-employees, so any payoff from an important invention doesn't follow the employee. Yet the employee may have signed an agreement that he or she will assist the company in matters related to the invention/patent for a specified period of time after separation from the company. Usually it lasts two to six years or more, depending on the pre-invention assignment agreement and company policy.

TAKING ANOTHER SHOT
This isn't the first attempt to improve engineers' invention rights. That started some years ago with the National Society of Professional Engineers in California, but eventually fell through the cracks for lack of interest and followup. (However, the NSPE, a national society of engineering professionals from all disciplines with about 58,000 members, offers a "recommended" four-page IP agreement on its Web site that it says is designed to protect the rights and privileges of both the company and the employee.)

In 1970, legislation was introduced to Congress in a bill authored by Congressman John E. Moss of California. The Moss bill was rewritten several times and assigned to the House Judiciary Committee's Subcommittee on Patents and Trademarks. But it never actually received a hearing. Moss retired and no one picked up the legislative cudgel until 1963, when California Congressman George Brown introduced legislation to make pre-assignment IP agreements an unfair labor practice. But the bill never received a hearing.

The IEEE-USA and its IP Committee have been working on this issue since 1975. Its current effort is based largely on research that produced the Moss bill, and which an IEEE spokesman says "aligns well" with the feedback the group is now getting from working engineers. But in anything involving politics, numbers count. The IEEE plan includes a significant publishing effort to build and mobilize a constituency and ensure that there is a consensus on the issues.

Kuntz calls the pre-invention assignment one of many issues facing America's knowledge management in a competitive world market. The challenge, he says, is "just another part of the treatment of intellectual human capital as a disposable commodity instead of the nation's most valuable asset."

"The focus," says Kuntz, "is to effect change, not just produce more rhetoric on the subject." He says there already is a debate over whether there should be a federal government strategy or a multiplicity of state laws, even before the scope of any law is resolved. (Eight states—California, Delaware, Illinois, Kansas, Minnesota, North Carolina, Utah, and Washington—already have pre-invention assignment laws written into their labor codes). Kuntz says, "There is frustration at the federal level, but with the complexity of the issue and interstate commerce, this requires a federal law."

Need More Information?
Analog Devices Inc.
www.analog.com

IEEE-USA
www.ieeeusa.org

Intellectual Property Lawnotes
www.lawnotes.com

National Society of
Professional Engineers

www.nspe.org

RF Micro Devices
www.rfmd.com

Yamacraw Design Center
www.yamacraw.org

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